Update: New Zealand’s Proposed GST Rules for Low Value Imported Goods
There has been a significant increase in overseas businesses selling online to New Zealand customers. A new Bill has been introduced to maintain fairness in New Zealand’s tax system and ensure New Zealand retailers are not overly disadvantaged when New Zealand consumers import low value goods without GST. This Taxation Bill, ‘GST Offshore Supplier Registration and Remedial Matters’, includes new rules targeting imported goods worth NZ$1,000 or less. It expands the broad base of New Zealand’s GST system to capture more sales. It is however important to note that goods imported with a value over $1,000 will continue to have GST charged at the border by New Zealand Customs Service.
Currently, GST is not collected on goods imported over $400. The new rules require offshore suppliers to register and account for GST if they make sales to New Zealand private (not GST registered) consumers in a 12-month period of NZ$60,000 or more. The $60,000 registration threshold is the same as that which applies to domestic businesses. The new rules for offshore suppliers will apply from 1 October 2019 and mean New Zealand based consumers will have to pay 15% GST on purchases made from overseas websites, making online shopping more expensive than before.
What do the changes mean for you?
GST is charged on purchases made by New Zealand consumers, at the point of sale, if the goods are worth $1,000 or less. GST will also be payable on any transport and insurance costs. GST is collected on your purchase at the border, by Customs, if it was not charged at the point of sale for any reason.
Purchases valued at more than $1,000 are not caught by the new rules and they will continue to be taxed by Customs.
Businesses that are GST-registered in New Zealand will have no GST charged on purchases valued at or below $1,000. These businesses will need to provide their GST number to the offshore supplier to prove they are a business customer and to ensure no GST is charged on their purchase. GST will be charged on purchases of $1,000 or more but can be claimed back as a business expense.
Going forward from 1 October 2019, online marketplaces and redelivery businesses that reach the $60,000 threshold must also charge GST on supplies made to New Zealand consumers. Redelivery businesses provide an offshore address or mailbox for online shoppers to ship their purchase to when the online supplier does not offer shipping to New Zealand.
Offshore suppliers can appoint a New Zealand agent, such as a tax agent, to register their business for GST and remit the GST on the sales of goods through their platform to Inland Revenue. Offshore suppliers will also be entitled to claim a GST deduction for any New Zealand GST they may incur under the new rules, which will reduce the overall amount of GST payable to Inland Revenue. Redelivery businesses will need to be particularly clear as to exactly when their GST liability is triggered. Professional tax advice should be taken in relation to the above.
After 1 October 2019, offshore suppliers will need to file GST returns with Inland Revenue on a quarterly basis. For the first six months of the new rules, offshore suppliers will have the option to elect to file a GST Return that covers the period from 1 October 2019 to 31 March 2020. They will need to file quarterly returns thereafter. It is important for offshore suppliers to start preparing as early as possible to comply with the new regime to avoid any fines or penalties from Inland Revenue.
These new GST rules for offshore suppliers aim to level the playing field for local retailers who have been at a disadvantage by having to charge GST while their offshore competitors have not. We recommend that sellers who are impacted by these changes consider their position and processes early, so they can adapt quickly if these changes are implemented in October.